China Great Wall Life has once again raised the capital market by acquiring shares. The latest announcement from Ganyue Expressway (600269.SH) shows that China Great Wall Life has increased its holdings in the company to a stake above 5%, and does not exclude the possibility of continuing to increase its holdings in the company within the next 12 months.

According to Caixin reporters, this is China Great Wall Life's third takeover of an A-share listed company in the past month, and since the beginning of the year, it has taken 5 of the 6 takeovers in the insurance industry. However, behind the frequent takeover of the capital market, China Great Wall Life's business performance faces considerable challenges. In 2023, the company suffered a loss of 367 million yuan, and in the first quarter of 2024, it recorded a loss of 355 million yuan.

Insiders say that as one of the financial industries, life insurance's asset-liability match has a decisive impact on its operations. Yu Cheng, director of actuarial and risk management for Insurance Investment at Ernst & Young (China), suggested that in the current market environment, personal insurance companies should not only draw on international experience to increase research on low-guarantee, no-guarantee, or flexible-guarantee products, but also strive to expand profitability sources, increase contributions from fees and mortality margins, and develop risk reduction, health management, retirement and other services, expand internal capitalization, and create diversified value for customers and the company beyond wealth appreciation.

China Great Wall Life acquires a stake in Ganyue Expressway and nominates directors.

China Great Wall Life has completed its fifth takeover of the year, with Ganyue Expressway being the latest target.

According to the announcement, China Great Wall Life has increased its holdings by 185,900 shares through concentrated bidding on the secondary market, accounting for 0.008% of the company's total share capital.

Previously, China Great Wall Life already held 116.59 million shares of Ganyue Expressway, accounting for 4.99% of the company's total share capital. The shares acquired through concentrated bidding on the secondary market this time, together with those previously held, add up to a total of 116.77 million shares, or 5% of the company's total share capital.

It is understood that Ganyue Expressway is an infrastructure construction and operation service listed company controlled by Jiangxi Provincial Communications Investment Group, with its main revenue coming from collecting tolls from vehicles passing through, mainly managing and operating multiple expressway properties such as Changjiu Expressway, Changzhang Expressway and Changtai Expressway.

In the first quarter of this year, Ganyue Expressway achieved revenue of 1.559 billion yuan, a year-on-year increase of 0.19%; net profit attributable to shareholders was 391 million yuan, a year-on-year decrease of 7.65%.

It is reported that China Great Wall Life's equity change this time is based on the insurance company's own configuration needs and long-term investment strategy of listed companies, with funds coming from its own funds, and it does not exclude the possibility of continuing to increase its stake in Ganyue Expressway within the next 12 months.

At the same time, China Great Wall Life nominated Liu Wenpeng, the company's current deputy general manager and chief investment officer, as well as the deputy chairman and general manager of China Great Wall Wealth Insurance Asset Management, as a director of the new board of directors of Ganyue Expressway.

The relevant person in charge of China Great Wall Life said that reaching the takeover line by increasing holdings in Ganyue Expressway is an important manifestation of the company's long-term investment concept of insurance funds, avoiding short-term stock price speculation, promoting the long-term healthy development of listed companies, and playing a patient capital role for insurance funds.

Within a year, insurers have taken over 6 A-share listed companies, with China Great Wall Life alone accounting for 5 of them.

Since 2023, the trend of insurers increasing their allocation of high-dividend equity assets has been obvious in the context of declining interest rates.

According to Caixin reporters, since 2023, 5 insurers have taken over 11 listed companies, including 3 H-share and 8 A-share listed companies. Among them, China Great Wall Life has taken over 7 A-share listed companies, the most among all insurers.

In June 2023, China Great Wall Life purchased Zhejiang Communications Technology (002061.SZ) and Henan Zhongyuan Expressway (600020.SH), reaching the takeover line.

In January of this year, China Great Wall Life successfully took over Wuxi Rural Commercial Bank (600908.SH), holding 107 million shares, or 5% of the company's total share capital.

Ganyue Expressway, controlled by Jiangxi Provincial Communications Investment Group, is a listed company engaged in infrastructure construction and operation services. Its main revenue comes from collecting tolls from vehicles passing through, mainly managing and operating multiple expressway properties such as Changjiu Expressway, Changzhang Expressway and Changtai Expressway.

On May 16th, Great Wall Life increased its holding in City Development Environment by 399,500 shares through centralized bidding in the secondary market. After the shareholding increase, it held a total of 32.1043 million shares of the company, accounting for 5.0001% of the total share capital. Product structure wise, the operating income of products valued at 1-3 billion yuan are 40.1 million, 128.8 million, and 0.6 million yuan respectively.

On May 17th, Great Wall Life held a total of 46.7617 million shares of Jiangsu Jiangnan Water through secondary market holdings, accounting for 5.0001% of the company's total share capital.

Overall, among the six declarations made in the insurance industry this year, Great Wall Life alone has made five.

According to Ge Yuxiang, a non-bank financial analyst at Soochow Securities, the frequent declarations of insurance companies to acquire listed companies are related to new financial instrument regulations. If equity investments are measured at fair value and changes are reflected in the current period's profit and loss, the profit and loss statements of insurance companies will be greatly affected by market fluctuations.

However, after the acquisition, long-term equity investments or FVOCI (financial assets measured at fair value with changes reflected in other comprehensive income) can be used for subsequent measurement depending on whether directors are deployed, effectively reducing the volatility of current profits brought about by equity investments.

In the first quarter of this year, Great Wall Life incurred a loss of 355 million yuan, and the expansion of premium income may lead to aggressive investment strategies.

Although Great Wall Life has performed well in the capital market, it still faces certain pressures at the operational level. In recent years, the company's insurance business income has increased year by year, but net profits have been unstable.

Data shows that from 2019 to 2022, Great Wall Life achieved insurance income of 8.089 billion yuan, 8.765 billion yuan, 11.101 billion yuan, and 14.853 billion yuan respectively, with net profits of 115 million yuan, 135 million yuan, 149 million yuan, and 99 million yuan respectively.

In 2023, Great Wall Life's premium income was 23 billion yuan, but due to the unrealized loss of equity assets and the increase in reserve provision, the company suffered a net loss of 367 million yuan. In the first quarter of 2024, the company's insurance business income was 11.28 billion yuan, but it still faced a net loss of 355 million yuan.

To ease funding pressures, Great Wall Life received approval for an increase in capital at the end of last year, issuing 688 million new shares at a price of 1.59 yuan per share and a total increase in capital of 1.093 billion yuan, which to some extent improved the solvency situation at the end of last year. However, by the end of Q1 this year, Great Wall Life's comprehensive solvency adequacy ratio and core solvency adequacy ratio had fallen to 151.31% and 75.66% respectively.

Insiders say that over the past two years, with several star savings insurance policies such as increment life insurance and pension plans, Great Wall Life's premium scale has achieved rapid growth. However, while the products sold well, they also consumed a certain amount of the company's capital, posing a challenge to solvency, which in turn leads to high-cost liabilities or forces the company to adhere to aggressive investment strategies on the asset side.